A rising tide lifts which boats?

My friend Jordan Ellenberg has a really excellent blog post over at Quomodocumque, which is one of my favorite blogs in that it combines hard-core math nerdiness with funny observations about how much the Baltimore Orioles stink (among other things).

Specifically, in that article, Kaufman tries to use the old saying “a rising tide lifts all boats” to argue that most people (in fact, 81% of them) are better off than their parents were. What’s awesome about Jordan is that he goes to the source, a Scott Winship article, and susses out the extent to which that figure is true. Turns out it’s kind of true with a certain way of weighting numbers depending on how many kids there are in the family and because so many women have started working in the past 40 years. Jordan’s conclusion:

So yes: almost all present adults have more money than their parents did. And how did they accomplish this? By having one or two kids instead of three or four, and by sending both parents to work outside the home. Now it can’t be denied that a society in which most familes have two income-earning parents, and the business-hours care of young children is outsourced to daycare and preschool, is more productive from the economic point of view. And I, who grew up with a single sibling and two working parents and went to plenty of preschool, find it downright wholesome. But it is not the kind of development political conservatives typically celebrate.

Another thing that Jordan tears apart from the article is that the original source specifically pointed out stuff that Kaufman seems to have missed, given his political agenda:

Winship also emphasizes the finding that children in Canada and Western Europe have an easier time moving out of poverty than Americans do. This part is absent from Kaufmann’s piece. Maybe he didn’t have the space. Maybe it’s because a comparison with higher-tax economies would make some trouble for his confident conclusion: “the punitive redistribution policies favored by Occupy Madison will divert capital away from productive initiatives that enhance growth and earnings opportunities for all, while doing nothing to build the stable families and “bottom-up” capabilities that are particularly important for helping the poorest Americans escape poverty.”

When the Isthmus is running a more doctrinaire GOP line on poverty than the National Review, the alternative press has arrived at a very strange place indeed.

Go, Jordan!

Let’s go back to that phrase “a rising tide lifts all boats”. It was the basis of Kaufman’s argument, and as Jordan points out was a pretty weak basis, in that the lift was arguable gotten only through sacrifice. But my question is, is that a valid argument to make anyway?

Let’s examine this metaphor a bit. When we think about it positively, and imagine something like the housing bubble which elevated many people’s net worth (ignoring the people who weren’t home owners at all during that time), we can see why “a rising tide lifts all boats” is a good thing: we want the generic imaginary person to do well, and we’re all happy for them to do well.

However, if we turn that phrase around in a negative moment, it’s really not clearly a good perspective. Let’s try it: “an ebbing tide lowers all boats”. Take the example of a housing crash analogously to the above. Firstly it’s not true, since for those people who couldn’t afford housing in the bubble, a more reasonable housing market is a good thing (for some reason people keep forgetting this). Secondly, when we are thinking about lowered boats we worry about those people whose boats are lowered. Who are those people? How much have they lost? Will they be okay?

The answers are, they are the people who were barely able to own the house in the good times. They’ve lost everything. They aren’t okay.

It’s a nearly vapid phrase when you think about it, but it’s used by conservatives a lot to justify policies that only work well in good times.

I’d argue that the real question we should be asking isn’t whether we are all sailing away in boats but how much risk we take on as individuals. I will go into this further in another post, but the gist is that, instead of the unit of measurement being assumed to be dollars, I’d like to reframe the concept of economic health in terms of a unit of risk. Risk is harder to measure than dollars, and there are lots of different kinds of risk, but even so it’s a worthy exercise.

For example, in the housing boom we had people who could barely afford a house get into ridiculous mortgage contracts, with resetting usurious interest rates. They were taking on enormous amounts of risk, in this case risk of being foreclosed on and losing their home. By contrast, people who were well-off at the start of the housing boom are for the most part still well off. There was very little risk for them.

I’d like to offer up an alternative phrase which would capture the risk perspective. Something like, “we should make sure everyone’s boats are water tight and firmly moored to the pier”. Not nearly as catchy, I know. But to make for it I’m linking to this related video called I’m On a Boat. I’ve actually been looking for excuses to link to this for a while. Here’s a kind of awesome picture from the video:

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While we are on the topic of financial tide metaphors, I liked Warren Buffet’s comment on the large number of fraudsters discovered in 2008: “When the tide goes out you discover who was swimming without trunks”

We have discussed elsewhere why the “trickle down” metaphor should be “trickle up” (because the poor spend their money, thereby stimulating economic activity, while the rich save it, taking it out of circulation in the short term).

It seems that what the ultra-conservatives need to make their metaphors work is a negative gravity planet.

Eh, I don’t think it’s the alternative press’ responsibility to always fall on the “left” side of issues, as defined by standard viewpoints.

I actually think that expected tail loss is a great measure for social welfare. So is trying to grow incomes for the lowest quintile instead of the median. Honestly, who cares if people get more iPads when there is a young father in Cincinnatti dying because he couldn’t get dental care.